When you speak to a lender, you should already have a budget in mind. This is the amount you can realistically afford to pay toward a mortgage each month. There are all sorts of mortgage calculators online to help you determine your budget.
This is another critical step when buying a house, and it's something you should start doing today. Your credit score can make or break your chances of getting a mortgage loan.
FHA. Conventional. ARM. Fixed-rate. You've got quite a few choices to make when it comes to mortgage loans. Making the right choice now can help you avoid problems later on. The good news is that many of the so-called exotic mortgage products disappeared in the wake of the housing crisis. Today, we are left with the traditional workhorses of the lending world.
Mortgage pre-approval is the next logical step to buying a home. You've got a budget and a spending limit on paper. You've started saving your cash. You've checked your credit reports and scores. And you've researched the different types of mortgages to see which one suits your situation. Now you're ready to talk to a mortgage lender.
In either of these scenarios, you should have a real estate agent help you. In most states, the seller is the one who pays the agent's commission. So there's really no reason to fly solo.
A good agent can help you navigate the later steps to buying a home especially steps 6 and 7 below. You should accomplish steps 1 - 4 on your own, before talking to an agent. Once you've been pre-approved by a lender, you can start looking for an agent.
For most people, this is the most exciting step to buying a home. This is when you start looking for the place where you'll live for the next few years or longer.
Your offer should be based on comparable sales. These are similar types of houses that have solid in the same area recently. This is the best way to determine the current market value of a home you're considering. Remember, the seller's asking price might be realistic -- or ridiculous. You won't know until you look at the "comps."
The last thing the lender wants to do is invest $275,000 in a home that's only worth $220,000. If they had to foreclose and repossess the home down the road, they would end up selling it for a huge loss. So the lender will have the home appraised to determine its current market value.
Most inspections will include the visible portions of the roof, foundation, plumbing, electrical system, and heating / cooling system. If there are any other installed systems like a garbage disposal or sump pump, the inspector will look at those too.
Make sure you save up enough money to cover your closing costs. Your lender will give you a written estimate of these costs in advance, at the time you apply for the loan. But you should expect to pay more than the estimated amount. If your lender estimates your closing costs to be $7,000, you should prepare for them to be $8,000 by the time you actually close. It's called an "estimate" for a reason. It's common for home buyers to pay more than the estimated amount on closing day.